JOEL GOODIN D/B/A GOODINS MARKET AND DELI v. TBF FINANCIAL, LLC, LEASING, INC.; and JAMES R. ODELL
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RENDERED: April 16, 2004; 10:00 a.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-001336-MR
JOEL GOODIN D/B/A
GOODINS MARKET AND DELI
APPELLANT
APPEAL FROM BELL CIRCUIT COURT
HONORABLE JAMES L. BOWLING JR., JUDGE
ACTION NO. 00-CI-00367
v.
TBF FINANCIAL, LLC,
ASSIGNEE OF NORWEST FINANCIAL
LEASING, INC.; and
JAMES R. ODELL
APPELLEES
OPINION
AFFIRMING IN PART, VACATING AND REMANDING IN PART
** ** ** ** **
BEFORE:
BUCKINGHAM, McANULTY, AND VANMETER, JUDGES.
McANULTY, JUDGE:
This is an appeal from a summary judgment of
the Bell Circuit Court granted in favor of the creditor in a
collection case.
We conclude that the acceleration clause in
the lease agreement between the parties controls as to the
calculation of damages in the event of an undisputed breach by
the debtor.
We further conclude that a genuine issue of
material fact exists as to the total payments made by the debtor
in satisfaction of his obligation under the lease agreement.
Accordingly, we affirm in part and vacate and remand in part for
reasons set forth in further detail in this opinion.
On August 16, 2000, the appellee and creditor in this
action, TBF Financial, LLC., as assignee of Norwest Financial
Leasing, Inc. (TBF Financial), filed a complaint in the Bell
Circuit Court to collect on a debt in the amount of $13,236.47,
that was allegedly owed by appellant and debtor, Joel Goodin
d/b/a Goodins Market & Deli (Goodin) after Goodin defaulted on a
lease of a flavored iced drink machine.
On April 17, 1998,
Goodin financed the lease of the machine through Specialty
Equipment Leasing Services, a Division of Norwest Financial
Leasing, Inc.
Eventually, Norwest assigned to TBF Financial all
of its right, title and interest in the lease.
Under the terms of the lease, beginning in May of
1998, Goodin agreed to pay a monthly payment of $192.53 for 60
months.
Moreover, the lease had the following default
provision:
Default: If you [Lessee] do not pay rent
when due or if you break any of your
promises to this Lease, you will be in
default. If you default, we can require
that you pay the remaining balance of this
Lease and return the equipment to us. We
can also use any of the remedies available
to us under the Uniform Commercial Code or
any other law. If we refer this Lease to an
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attorney for collection, you agree to pay
our reasonable attorney’s fees and actual
costs, including our travel costs to any
deposition or court proceeding. If we have
to take possession of the equipment, you
agree to pay the cost of repossession. You
agree that we will not be responsible to pay
you any consequential or incidental damages
for any default by us under this Lease.
In other words, this is an acceleration clause requiring the
lessee, at the lessor’s option, to pay all of the balance due if
the lessee is in default.
See Carter v. Jim Walter Homes, Inc.,
Ky. App., 731 S.W.2d 12, 13 (1987) (operation of acceleration
clause in mortgage).
After seven months, Goodin stopped making his monthly
payments under the lease because the machine was inoperable.
Further, Goodin was under the impression the machine he agreed
to lease would be brand-new, however, the machine he received
from the supplier was a reconditioned machine.
Ultimately, in
late 1999, after Goodin informed the supplier that he no longer
wanted the machine, the supplier came to pick it up from
Goodin’s market and deli.
Thereafter, the supplier sold the
machine for $1,200.00.
Goodin filed an Answer and Counterclaim alleging that
the machine was defective and did not conform to the contract or
the representations of the seller.
Moreover, Goodin alleged
that TBF Financial and the supplier fraudulently represented
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that the machine he was leasing would be brand-new, not
reconditioned.
Discovery ensued.
In January of 2002, TBF Financial made a motion for
summary judgment.
In support, TBF Financial asserted that there
was no genuine issue as to any material fact.
TBF Financial
contended that Goodin did not dispute that he breached the
contract.
On the issue of damages, TBF Financial argued that
the parties had agreed to the proper measure of damages in the
default provision of the lease, and Goodin did not dispute the
accuracy of the accounting entered by TBF Financial in support
of its claim for relief.
The accounting may be summarized as
follows:
Total payments
due (60@ $192.53) $11,551.80
Payments made
(1,607.76)
Late charges
789.25
Credit for sale of
equipment
(1,200.00)
Total due
$ 9,533.29
In response to TBF Financial’s motion for summary
judgment, Goodin argued that the measure of damages was provided
in Kentucky Revised Statutes (KRS) 355.2A-528, the statutory
provision in Kentucky’s Uniform Commercial Code for calculating
the lessor’s damages in the event of default by the lessee.
Ultimately, on May 20, 2002, the trial court granted
TBF Financial’s motion for summary judgment.
The trial court
ordered Goodin to pay the sum of $9,533.29, together with
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interest thereon at the rate of 8 percent per annum from
September 28, 2001, until the date of this judgment and at the
rate of 12 percent per annum from May 20, 2002, until paid; for
an attorney’s fee in the amount of $3,001.50 as provided in the
lease agreement; and for all costs expended by TBF Financial.
The trial court further dismissed Goodin’s counterclaim with
prejudice.
In this appeal, Goodin argues that the trial court
erred by granting summary judgment.
Goodin contends that the
formula used by the trial court in calculating damages was
unfair.
Further, the parties to the lease did not agree to this
measure of damages.
Specifically, Goodin asserts that the lease
provision addressing default speaks in terms of remedies, not
calculation of damages.
Because the lease is silent as to how
“remaining balance” of the lease should be calculated, the trial
court should have deferred to KRS 355.2A-528.
Goodin does not
appeal the trial court’s dismissal of his counterclaim.
The standard of review on appeal of a summary judgment
under Kentucky law is well-settled.
Specifically, the standard
is “whether the trial court correctly found that there were no
genuine issues as to any material fact and that the moving party
was entitled to judgment as a matter of law.”
Scifres v. Kraft,
Ky. App., 916 S.W.2d 779, 781 (1996); Rules of Civil Procedure
(CR) 56.03.
Moreover, “[t]he record must be viewed in a light
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most favorable to the party opposing the motion for summary
judgment and all doubts are to be resolved in his favor.”
Steelvest, Inc. v. Scansteel Service Center, Inc., Ky., 807
S.W.2d 476, 480 (1991).
Further, where the relevant facts are
undisputed and the dispositive issue becomes the legal effect of
those facts, our review is de novo.
See Western Ky. Coca-Cola
Bottling Co., Inc. v. Revenue Cabinet, Ky. App., 80 S.W.3d 787,
790 (2001).
Turning to the facts of this case, there is no
question that Goodin defaulted under the lease in failing to
make his monthly payments.
The issue concerns the amount of
damages to which TBF Financial is entitled due to Goodin’s
breach.
case.
Goodin argues that KRS 355.2A-528 is applicable in this
KRS 355.2A-528 is as follows:
(1) Except as otherwise provided with
respect to damages liquidated in the lease
agreement (KRS 355.2A-504) or otherwise
determined pursuant to agreement of the
parties (KRS 355.1-102(3) and 355.2A-503),
if a lessor elects to retain the goods or a
lessor elects to dispose of the goods and
the disposition is by lease agreement that
for any reason does not qualify for
treatment under KRS 355.2A-527(2), or is by
sale or otherwise, the lessor may recover
from the lessee as damages for a default of
the type described in KRS 355.2A-523(1) or
355.2A-523(3)(a), or, if agreed, for other
default by the lessee:
(a) Accrued and unpaid rent as of the date
of default if the lessee has never
taken possession of the goods, or, if the
lessee has taken possession of the goods, as
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of the date the lessor repossesses the goods
or an earlier date on which the lessee makes
a tender of the goods to the lessor;
(b) The present value as of the date
determined under clause (a) of the total
rent for the then remaining lease term of
the original lease agreement minus the
present value as of the same date of the
market rent at the place where the goods are
located computed for the same lease term;
and
(c) Any incidental damages allowed under KRS
355.2A-530, less expenses saved in
consequence of the lessee's default.
(2) If the measure of damages provided in
subsection (1) is inadequate to put a lessor
in as good a position as performance would
have, the measure of damages is the present
value of the profit, including reasonable
overhead, the lessor would have made from
full performance by the lessee, together
with any incidental damages allowed under
KRS 355.2A-530, due allowance for costs
reasonably incurred and due credit for
payments or proceeds of disposition.
In response to Goodin’s assertions, TBF Financial
argues that the parties agreed on the method of calculating
damages in the event of the lessee’s breach, therefore, KRS
355.2A-528 is inapplicable.
We agree.
KRS 355.2A-528 expressly
provides that the parties are free to make such an agreement.
We further agree with TBF Financial that Goodin’s argument that
the parties had an agreement as to the remedy, but no agreement
as to damages is a distinction without a difference because the
recovery of damages is the remedy under the circumstances of
this case.
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Here, TBF Financial and Goodin contracted for the
financing of Goodin’s lease of a machine used in his business.
The parties contemplated damages in the event of Goodin’s
default in advance and inserted such a provision in the
contract.
Specifically, the damages equal the performance
promised by Goodin less the performance delivered.
In addition,
Goodin agreed to pay TBF Financial’s attorney’s fees if the
matter was referred to an attorney for collection.
In short,
TBF Financial did not seek any damages over and above what was
set out in the default provision of the lease agreement.
Because the parties had an agreement as to damages for the
lessee’s default, KRS 355.2A-528 is inapplicable.
Accordingly,
we affirm the trial court’s judgment insofar as it defers to the
method of calculating damages set out in the lease agreement.
After reviewing the record, however, we noticed
several discrepancies in the total amount of payments made by
Goodin before he returned the machine.
First, TBF Financial
stated that Goodin had paid a total of $1,524.17 in monthly
payments.
$1,607.76.
Then, it stated that Goodin had paid a total of
Throughout discovery and in this appeal, Goodin
maintains that he paid a total of $2,013.76, and the record
further indicates in Joel Goodin’s deposition that he produced
cancelled checks to substantiate that amount.
Because we
believe a genuine issue of material fact remains as to the total
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amount paid by Goodin in satisfaction of the lease agreement, we
vacate the judgment and remand this case for the sole purpose of
determining that amount.
For the foregoing reasons, the trial court’s judgment
is affirmed in part and vacated and remanded in part for
proceedings consistent with this opinion.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Dennis Nagle
Denham, Golden and Nagle
Middlesboro, Kentucky
James R. Odell
Lexington, Kentucky
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